NASHVILLE—Small business optimism took another dive in April, falling 5.5 points to 90.9, with owners expressing certainty the economy will weaken in the near-term. On the positive side, business owners expect the economy will improve over the next six months, the National Federation of Independent Business (NFIB) reported.
A new survey of CFOs, however, has found considerably less optimism.
The NFIB’s Optimism Index has fallen 13.6 points over the last two months, with nine of 10 Index components declining in April and one improving.
“The impact from this pandemic, including government stay-at-home orders and mandated non-essential business closures has had a devasting impact on the small business economy,” said NFIB Chief Economist William Dunkelberg. “Owners are starting to benefit from the PPP and EIDL small business loan programs as they try to reopen and keep employees on staff. Small business owners need more flexibility, though, in using the PPP loan to support business operations and liability protection so that all these efforts to support small businesses are not ultimately lost in costly litigation.”
Sales Expectations
Spotlighting small business owners’ need for more flexibility is that real sales expectations in the next six months declined 30 points to a net negative 42%, the lowest reading in the survey’s 46-year history. The second-lowest reading was net negative 24% in April 1980. A net negative 11% of all owners (seasonally adjusted) reported higher nominal sales in the past three months, down 19 points from March, the NFIB explained.
“The NFIB Uncertainty Index fell 17 points in March to 75, with most owners quite certain that the economy will weaken in the near-term. However, reports of expected better business conditions in the next six months increased 24 points, rebounding from a 17-point decline in March. Owners’ optimism about future conditions indicates they expect the recession to be short-lived,” the NFIB said.
Additional Findings
Other key findings from April’s Optimism Index included:
- Earnings trends declined 14 points to a net negative 20%. Among owners reporting weaker profits, 39% blamed weak sales, 16% blamed usual seasonal change, six% cited price changes, 4% cited labor costs, and 2% cited materials costs. For owners reporting higher profits, 63% credited sales volumes and 17% credited usual seasonal change.
- The percentage of owners thinking it’s a good time to expand lost 10 points falling to 3%, its lowest level since March 2010.
CFOs Pessimistic
In New York, a PricewaterhouseCoopers survey of U.S. CFOs has found increased pessimism. In early March, 69% of chief financial officers predicted their companies would be back to “business as usual” in under a month, with just 6% believing a return to normalcy would take six to 12 months, and not a single CFO thought it would take longer than a year.
That has now been reversed. The same survey on May 8 found just 10% of CFOs said it would take their businesses less than a month to recover, and 7% predicted it would take more than a year. The rest of the field was divided between one to three months (32%), three to six months (31%) and six to 12 months (20%).